Download The Wall Street Journal - 02 12 2020 PDF

TitleThe Wall Street Journal - 02 12 2020
LanguageEnglish
File Size15.9 MB
Total Pages32
Document Text Contents
Page 1

* * * * * * WEDNESDAY, DECEMBER 2, 2020 ~ VOL. CCLXXVI NO. 130 WSJ.com HHHH $4 .00

DJIA 29823.92 À 185.28 0.6% NASDAQ 12355.11 À 1.3% STOXX600 391.90 À 0.7% 10-YR. TREAS. g 27/32 , yield 0.933% OIL $44.55 g $0.79 GOLD $1,814.10 À $38.40 EURO $1.2072 YEN 104.33

BY AARON TILLEY

Salesforce
Sets Deal
For Slack,
With Big
Premium
Business-software firm
to pay $27.7 billion for
office messaging app,
challengingMicrosoft

ileging big investors with sen-
sitive information. Public
diaries show that neither Ms.
Lagarde’s predecessor, Mario
Draghi, nor his chief econo-
mist, Peter Praet, made similar
calls during their last two
years in office.

In 2015, the ECB tightened
its communication rules after
a board member gave a closed-
door speech to investors at a
dinner that revealed changes
to its bond-buying program.

“You don’t just pick up the
phone and talk to the select
few,” said Panicos Demetria-
des, a former member of the
ECB’s rate-setting committee
as head of Cyprus’s central
bank. “Talking only to the big
players is what you’re not sup-
posed to be doing as the cen-
tral bank. It’s not helpful for
relations with the public.”

An ECB spokesman con-
firmed the calls. He said the
bank decided in September
2019 to start the briefings af-

PleaseturntopageA8

Soccer Fans
Rate Players
For Wrinkles

i i i

Stars of the 1980s
compete for title
of oldest-looking

BY JAMES HOOKWAY

Back in the 1980s, when he
played goalkeeper for Scottish
soccer side Ayr United, Hugh
Sproat liked to entertain fans
by swinging on the crossbar.

He also grew a thick, bristly
mustache, which this fall made
him a front-runner in a con-
test to see who was the old-
est-looking player before
sports nutrition and ice recov-
ery baths took over the game.

Englishman Winston Gal-
lagher started the tournament
just as much of the U.K. was
heading into its second lock-
down. He was inspired by an
album of old soccer cards he
found that he and other chil-

PleaseturntopageA5

Joe Biden’s economic
team is taking shape with
plans to remake the Trump
administration’s approach to
economic relations overseas,
with a distinction: agree-
ment with President Trump’s
assertion that globalization
has been hard on many
Americans but differences on
how to address it.

The distinction shows Mr.
Trump likely will have a last-
ing impact on the direction
of U.S. economic policy, even

BY JON HILSENRATH
AND NICK TIMIRAOS

Transition Moves Apace Despite President-Elect’s Injury

ON THE MEND: Joe Biden sported a medical boot in Wilmington, Del., on Tuesday. The president-elect twisted his ankle
over the weekend while playing with his dog Major, his aides said, and was diagnosed with a fractured foot.

A
N
D
R
E
W

H
A
R
N
IK
/A

S
S
O
C
IA
T
E
D
P
R
E
S
S

though the incoming admin-
istration is trying to alter
important parts of it.

For many years, peaking in
the 1990s, mainstream Demo-
crats and Republicans cham-
pioned globalization and
trade agreements with China,
Mexico and others as devel-
opments that would make
Americans better off. Econo-
mists said that there would
be winners and losers as the
U.S. imported and exported

PleaseturntopageA10

� BlackRock alumni tapped for
new administration................ A10

ECB Economist Broke
With Practice on Calls

FRANKFURT—The Euro-
pean Central Bank’s chief
economist made dozens of pri-
vate calls to banks and inves-
tors after policy meetings this
year, breaking with the bank’s
usual practice of delivering in-
formation to everyone at the
same time, according to three
people with whom he spoke
and a review of his schedule.

The calls, which were aimed
at explaining the bank’s public
pronouncements, began in
March, after ECB President
Christine Lagarde flummoxed
traders by suggesting the cen-
tral bank wouldn’t prop up It-
aly’s bond market. Italian
stocks and bonds slumped.

Hours later, Philip Lane, the
chief economist, placed sepa-
rate calls to 11 banks and in-
vestors in which he sought to
clarify the message.

Former central-bank offi-
cials said the calls risked priv-

BY TOM FAIRLESS
AND PAUL J. DAVIES

cess-card swipes in more than
2,500 office buildings in 10 of
the largest U.S. cities, said
that about a quarter of em-
ployees in those buildings had

Salesforce.com Inc. agreed
to buy messaging company
Slack Technologies Inc. in a
$27.7 billion deal that shows
how the biggest players in
cloud computing are racing to
add muscle amid the pan-
demic’s remote-work boom.

The cash-and-stock deal,
made public Tuesday, is the
biggest move yet by Salesforce
Chief Executive Marc Benioff,
a pioneer in selling subscrip-
tions to software run on re-
mote servers, to turn the com-
pany he co-founded 21 years
ago into a broad-reaching
powerhouse in tech tools for
businesses. The deal is almost
twice as large as Salesforce’s
largest acquisition so far, and
would turn the combined com-
pany into a more formidable
competitor to Microsoft Corp.
and Google parent Alphabet
Inc. The Wall Street Journal
previously reported Salesforce
and Slack were in advanced
deal talks.

The combination also
brings together two of the
tech industry’s highest-profile
CEOs—people who have made
a career of taking on Silicon
Valley icons. Mr. Benioff has
positioned himself as a promi-
nent voice in U.S. business, us-

PleaseturntopageA6

listed companies to have at
least one woman on their
boards, in addition to a direc-
tor who is a racial minority or
one who self-identifies as les-
bian, gay, bisexual, transgen-
der or queer.

Companies that don’t meet
the standard would be re-
quired to justify their decision
in order to remain listed on
Nasdaq.

Banks, asset managers and
lawmakers in California have
taken various steps to diver-
sify the predominantly white

and male boardrooms of U.S.
companies. Nasdaq’s move
could have greater impact be-
cause of its ability to set rules
for the nearly 3,000 corpora-
tions listed on its exchange.

In a review carried out over
the past six months, Nasdaq
found that more than three-
quarters of its listed companies
would fall short of the pro-
posed requirements. Around
80% or 90% of companies had
at least one female director,
but only about a quarter had a
second one who would meet

the diversity requirements, a
person familiar with the review
said, adding it was difficult to
measure because of inconsis-
tencies in the way companies
report such data.

Nasdaq defined underrepre-
sented minorities as individu-
als self-identifying as Black,
Hispanic, Asian, Native Ameri-
can or belonging to two or
more races or ethnicities.

The review found smaller
companies tended to have less
diverse boards and would

PleaseturntopageA2

Nasdaq Inc. is pushing to re-
quire the thousands of compa-
nies listed on its stock ex-
change to include women,
racial minorities and LGBT indi-
viduals on their boards, in what
would be one of the most force-
ful moves yet to bring greater
diversity to U.S. corporations.

The exchange operator filed
a proposal with the Securities
and Exchange Commission on
Tuesday that would require

BY ALEXANDER OSIPOVICH
AND AKANE OTANI

Nasdaq Pushes Diversity Rule

Biden’s Economic
Team Seeks
Global Reset

President-elect’s advisory picks are
circumspect about pitfalls Trump highlighted

returned to work as of Nov. 18.
That rate is up sharply from

an April low of less than 15%,
which largely consisted of
building-maintenance and es-
sential workers. The office re-
turn rate climbed steadily dur-
ing the summer and early fall,
but it has flattened out after
reaching a high point of 27% in
mid-October, Kastle said. The
rate for last week was down
even more sharply than in pre-
vious weeks but likely reflected
the Thanksgiving Day holiday.

“There’s a huge headwind
against company executives to
strongly push their employee
bases to come back to work,”
said Douglas Linde, president
of big office owner Boston
Properties Inc.

Despite the success of work
PleaseturntopageA4

U.S. employees started
heading back to the office in
greater numbers after Labor
Day but that pace is stalling
now, delivering another blow
to economic-recovery hopes in
many cities.

The recent surge in Covid-19
cases across the country has
led to an uptick in people re-
suming work at home after
some momentum had been
building for returning to the
workplace, property analysts
said. Floor after floor of empty
office space is a source of
great frustration for landlords
and companies, which have in-
vested millions of dollars in
adapting building plans and
developing new health proto-
cols to make employees com-
fortable with a shared location.

Kastle Systems, a national
security firm that tracks ac-

BY PETER GRANT

Big Cities Face Setbacks
As Office Returns Fall Off

Nov. 25
17.6%

Percentage of
U.S. workers returning
to the office

Source: Kastle Systems

100

0

Feb. 2020 Nov.

20

40

60

80

%

� Panel advises that health
workers get first vaccines... A6

Salesforce.
#1CRM.

Ranked #1 for CRMApplications based on
IDC 2020H1 RevenueMarket ShareWorldwide.

19.8%

4.8%
5.3%

3.8%
3.9%

salesforce.com/number1CRM
CRM market includes the following IDC-defined functional markets: Sales Force Productivity and Management,
Marketing Campaign Management, Customer Service, Contact Center, Advertising, and Digital Commerce
Applications. © 2020 salesforce.com, inc. All rights reserved. Salesforce.com is a registered trademark of
salesforce.com, inc., as are other names and marks.

2016 2017 2018 2019 2020H1

Source: IDC, Worldwide Semiannual
Software Tracker, October 2020.

CONTENTS
Arts in Review... A13
Business News.. B3,5
Crossword.............. A14
Heard on Street. B12
Markets..................... B11
Opinion.............. A15-17

Personal Journal A11-12
Property Report... B6
Sports....................... A14
Technology............... B4
U.S. News............. A2-6
Weather................... A14
World News........ A7-9

s 2020 Dow Jones & Company, Inc.
All Rights Reserved

>

What’s
News

� The Justice Department
hasn’t found evidence of
widespread voter fraud that
could reverse Biden’s elec-
tion victory, Barr said, deal-
ing a blow to Trump, who
launched fresh legal claims
to contest the results. A5
�Barr namedDurham a
special counsel, giving him
protection to continue into
the Biden administration his
investigation of the origins of
theFBI’s2016Russiaprobe.A5
�AU.S. panel recommended
that health-care workers and
residents of long-term-care
facilities be the first to receive
any Covid-19 vaccine doses
from the limited supply that
will be available initially. A6
� Lawmakers released a
blitz of competing coronavi-
rus-relief proposals, reignit-
ing stalled talks but with no
clear signs that Democratic
and Republican leaders
would reach a consensus. A3
�The Treasury’s decision
not to renew a suite of emer-
gency Fed lending programs
spurred a partisan fight over
whether and how the Biden
administration should be al-
lowed to use the programs.A3
�The SBA released detailed
loan information for mil-
lions of borrowers under
the Paycheck Protection
Program, amid signs of
fraud in the relief effort. A3
� Trump threatened to
veto a defense-policy bill if
it doesn’t include language
overturning a provision that
gives social-media compa-
nies broad immunity for the
content they publish. A2
� China said it landed a
probe on the moon, its lat-
est space endeavor. A9

Salesforce agreed to buymessaging company
Slack in a $27.7 billion deal
that shows how the big-
gest players in cloud com-
puting are racing to add
muscle amid the pandemic’s
remote-work boom. A1
�Nasdaq is pushing to re-
quire firms listed on its stock
exchange to include women,
racial minorities and LGBT
individuals on their boards,
aiming to bring more diver-
sity to U.S. corporations. A1
�The ECB’s chief economist
made private calls to banks
and investors after policy
meetings this year, breaking
with the bank’s usual practice
of delivering information to
everyone at the same time.A1
� The S&P 500 and Nasdaq
hit records, gaining 1.1% and
1.3%, as investor optimism
extended into a new month.
The Dow advanced 0.6%. B11
�More than half of U.S. ad
spending is for the first time
set to go to digital platforms,
the world’s largest ad buyer
said, as marketers’ strategy
shifts amid the pandemic. B1
� HPE is moving its head-
quarters to the Houston
area, the latest sign of how
the pandemic is reshaping
the way Silicon Valley
companies operate. B1
� U.S. shoppers spent
significantly less than last
year over a five-day holi-
day-weekend stretch that
included Black Friday and
Cyber Monday. B1
� Airbnb said it plans to
sell 50 million shares in an
IPO that could give the
company a valuation of as
much as $35 billion. B3

Business&Finance

World-Wide

Page 2

A2 | Wednesday, December 2, 2020 * * * * * THEWALL STREET JOURNAL.

THE WALL STREET JOURNAL
(USPS 664-880) (Eastern Edition ISSN 0099-9660)
(Central Edition ISSN 1092-0935) (Western Edition ISSN 0193-2241)

Editorial and publication headquarters:
1211 Avenue of the Americas, New York, N.Y. 10036

Published daily except Sundays and general legal holidays.
Periodicals postage paid at New York, N.Y., and other mailing offices.

Postmaster: Send address changes to The Wall Street Journal,
200 Burnett Rd., Chicopee, MA 01020.

All Advertising published in The Wall Street Journal is subject to the applicable rate card,
copies of which are available from the Advertising Services Department, Dow Jones & Co.
Inc., 1211 Avenue of the Americas, New York, N.Y. 10036. The Journal reserves the right
not to accept an advertiser’s order. Only publication of an advertisement shall constitute
final acceptance of the advertiser’s order.

Letters to the Editor: Fax: 212-416-2891; email: [email protected]

Need assistance with your subscription?
By web: customercenter.wsj.com; By email: [email protected]
By phone: 1-800-JOURNAL (1-800-568-7625)

Reprints & licensing:
By email: [email protected]
By phone: 1-800-843-0008

WSJ back issues and framed pages: wsjshop.com

Our newspapers are 100% sourced from sustainably certified mills.

GOT A TIP FOR US? SUBMIT IT AT WSJ.COM/TIPS

Black workers with a bach-
elor’s degree had a lower aver-
age rate of unemployment in
the 12 months ended in Octo-
ber than Latino workers. The
Outlook column in Monday’s
U.S. News section incorrectly
said Black workers had a
higher unemployment rate at
each level of educational at-
tainment than Latino workers.

President-elect Joe Biden
received 23,000 more votes in
Washtenaw County, Mich.,
than Hillary Clinton did four
years earlier. A Politics article
Saturday about young voters
incorrectly said Mr. Biden re-

ceived nearly 101,000 more
votes than Mrs. Clinton in
Washtenaw County.

Former Zappos.com Inc.
Chief Executive Tony Hsieh
died at a hospital in Bridge-
port, Conn. In some editions
Tuesday, a U.S. Watch article
about the medical examiner’s
findings incorrectly said Mr.
Hsieh died in New London,
Conn., which is where he suf-
fered injuries in a fire.

Target Corp. gave its
workers bonuses in July and in
October. A Business & Finance
News article Saturday about

Amazon.com Inc.’s holiday bo-
nus for workers failed to men-
tion Target’s October bonus.

Some U.S. local and state
governments have imposed
lockdowns in response to the
coronavirus pandemic. A Busi-
ness & Finance News article
Saturday about lockdown-wary
financial officers incorrectly
implied that the U.S. experi-
enced a federal lockdown.

Bond insurer Assured
Guaranty Ltd. has a portfolio
containing about 75% munici-
pal debt. An Oct. 23 Banking &
Finance article about the mu-

nicipal-bond insurance indus-
try incorrectly said 96%.

Michaela Coel’s sister ad-
mired Ms. Coel’s ability during
childhood to make friends eas-
ily. An article about Ms. Coel
in WSJ. Magazine’s November
issue incorrectly said her sis-
ter was chagrined.

Notice to readers
Wall Street Journal staff

members are working remotely
during the pandemic. For the
foreseeable future, please send
reader comments only by
email or phone, using the con-
tacts below, not via U.S. Mail.

Readers can alert The Wall Street Journal to any errors in news articles by emailing [email protected] or by calling 888-410-2667.

CORRECTIONS� AMPLIFICATIONS

diversity statistics within a
year. Time frames to meet di-
versity requirements for board
composition would depend on
a company’s listing tier, with
larger companies generally
getting four years to have two
diverse directors, and smaller
companies getting five years.

Executive recruiters said
some companies might face
difficulties complying with the
proposed rules. Board candi-
dates would need to volunteer
during the hiring process that
they identify as LGBTQ, for in-
stance, said Peter Crist, chair-
man of executive recruitment
firm Crist|Kolder Associates.

Critics called Nasdaq’s pro-
posal an overreach. “It’s an Al-

ice in Wonderland require-
ment,” said Tom Fitton,
president of conservative legal
group Judicial Watch, which
sued California this year over a
state law mandating greater
boardroom diversity. “This is
Nasdaq getting into woke ide-
ology, and it’s outside the law.”

Ms. Friedman said the pro-
posal would ultimately benefit
investors. “There are many
studies that indicate that hav-
ing a more diverse board…im-
proves the financial perfor-
mance of a company as well as
lowers the risk profile of com-
panies,” the Nasdaq CEO said.

Like other proposed
changes to exchange listing
rules, Nasdaq’s proposal is

U.S. NEWS

WASHINGTON—President
Trump threatened to veto an
annual defense-policy bill if it
doesn’t include language re-
voking a provision that gives
social-media companies broad
immunity for the content they
publish from users on their
sites.

Mr. Trump demanded on
Tuesday night that Section
230 of the 1996 Communica-
tions Decency Act be repealed.

“[I]f the very dangerous &
unfair Section 230 is not com-
pletely terminated as part of
the National Defense Authori-
zation Act (NDAA), I will be
forced to unequivocally VETO
the Bill when sent to the very
beautiful Resolute desk,” he
wrote on Twitter.

The president had previ-
ously threatened to veto the
same defense bill, which in-
cludes a 3% pay raise for U.S.
troops, over his opposition to
language that would rename
military bases honoring Con-
federate commanders.

The legislation would au-
thorize a total of $740 billion
in fiscal year 2021 for the De-
fense Department’s and En-
ergy Department’s national-se-
curity programs.

The Senate version passed
86-14, and the House version
passed 295-125, more than the

two-thirds supermajority
needed to override a potential
veto. Negotiators are working
to hammer out a compromise
bill that would then need to be
passed by each chamber.

Congress has passed annual
defense policy bills every year
for 59 years in a row, with bi-
partisan support.

Presidents from both par-
ties have always signed them,
even after issuing veto threats.

A spokesman for Senate Ma-
jority Leader Mitch McConnell
(R., Ky.) declined to comment.
House Speaker Nancy Pelosi
(D., Calif.) didn’t respond to a
request for comment.

“The President is right,”
tweeted Sen. Josh Hawley (R.,
Mo.), an outspoken critic of
big tech companies.

The annual defense bill is
one of several pieces of legis-
lation Congress is aiming to
pass before the end of the
year, along with a spending
bill to keep the government
funded and legislation to pro-
vide billions of dollars in coro-
navirus aid.

Section 230 has given on-
line companies broad immu-
nity from legal liability for
their users’ actions and wide
latitude to police content on
their sites.

But it has emerged in recent
years as a source of frustra-
tion for the president and his
allies, who allege that social-
media companies are misusing
the provision to limit conser-
vative viewpoints on their
sites. Democrats have raised
separate concerns about parts
of Section 230, arguing it has
allowed companies to ignore
false and dangerous informa-
tion spreading online, and
President-elect Joe Biden has
also called for revoking it.

BY ANDREW RESTUCCIA
AND LINDSAY WISE

President
Threatens
Defense
Bill Veto

At issue is a
provision giving
social-media firms
broad immunity.

Amid Presidential Transition, Construction Continues Along U.S.-Mexico Border

IMPASSE: Crews worked on the border wall Tuesday in Jacumba, Calif., as lawmakers in Washington are split over including the project in spending bills needed to keep
the government running this month. President-elect Joe Biden has said he would stop building the wall.

S
A
N
D
Y
H
U
FF
A
K
ER

/G
ET

TY
IM

A
G
ES

need to do more to respond to
the proposed rule, said Nelson
Griggs, an executive vice pres-
ident at Nasdaq. “With smaller
issuers, there will be greater
impact,” he said.

Potentially, companies that
fail to meet the requirements
could be delisted, though Nas-
daq executives said that is un-
likely. Companies could satisfy
the rule by making a disclo-
sure that explains why they
aren’t meeting Nasdaq’s diver-
sity target—for instance, be-
cause they have a different
philosophy regarding diversity.
Only firms that don’t make
such a disclosure could face
delisting proceedings. “We are
going to make it so that every
company has a very straight-
forward way to meet the stan-
dards,” Nasdaq Chief Execu-
tive Adena Friedman said.

Most of the biggest compa-
nies listed on Nasdaq appear
to already comply with the
new criteria. Among those
that don’t are Chinese internet
companies Pinduoduo Inc.,
JD.com Inc. and Baidu Inc.,

ContinuedfromPageOne

which have no women on their
boards. Others with all-male
boards include solar company
Array Technologies Inc., bio-
technology company Allakos
Inc. and National Beverage
Corp., maker of LaCroix spar-
kling water.

Foreign and smaller compa-
nies could meet the require-
ment with two female direc-
tors, Nasdaq said. Non-U.S.
companies could satisfy Nas-
daq’s diversity requirements
by appointing board members
from groups that are under-
represented in their countries.

The move is unlikely to de-
ter companies from listing
with Nasdaq, according to
Scott Yonker, a professor of fi-
nance at Cornell University.

“The cost of doing this is
relatively minor,” he said. Be-
cause many big companies
have become more diverse in
recent years, they likely won’t
struggle much to find board
members who meet the re-
quirements, Mr. Yonker said.

Nasdaq’s main rival, the
New York Stock Exchange, set
up an advisory council last
year to help its listed compa-
nies identify board candidates
from diverse groups. But the
NYSE, owned by Interconti-
nental Exchange Inc., hasn’t
gone so far as to mandate it
through a listing rule.

If Nasdaq’s proposal is ap-
proved by the SEC, companies
would have to disclose board-

subject to review by the SEC
and will undergo a public-
comment process, meaning it
will likely be months before
the commission approves or
rejects the plan. The decision
would likely come under the
incoming administration of
President-elect Joe Biden, who
will appoint a new person to
lead the SEC. Mr. Biden, a
Democrat, has made diversity
a priority in selecting nomi-
nees for his cabinet.

Corporate boards have
made their ranks somewhat
more diverse. Last year, 44%
of nonexecutive director ap-
pointments that companies
made in the U.S. were women,
according to executive-search
firm Heidrick & Struggles.
That marked the highest share
since the firm began tracking
the data 11 years ago.

And big institutions have
become more vocal about the
importance of diversity.

Goldman Sachs Group Inc.
said this year that it would no
longer underwrite initial public
offerings of companies in the
U.S. and Europe unless they
had at least one “diverse”
board member, with a focus on
women. Asset managers like
BlackRock Inc. and State Street
Global Advisors have pushed
their portfolio companies to
have more female directors.

—Andrew Ackerman
and Chip Cutter

contributed to this article.

Nasdaq to
Push Board
Diversity

WASHINGTON—Several Su-
preme Court justices expressed
doubts Tuesday over a lawsuit
that aims to hold Nestle USA
Inc. and Cargill Inc. liable for
the exploitation of child slaves
on Ivory Coast plantations that
supply the foodmakers with co-
coa.

The case was the latest test-
ing of the reach of the Alien
Tort Statute, a law originally
passed in 1789 to conform the
new American Republic to the
“law of nations.” It allows for-
eign citizens to seek redress in
U.S. courts for such affronts to
universal norms as piracy and
attacks on diplomats.

In recent years, human-
rights lawyers have targeted
deep-pocketed companies for
alleged misconduct overseas.
Corporations have fought back,
with significant success, to nar-
row their potential liability in

U.S. courts.
In 2013, the court ruled that

foreign corporations were im-
mune from suit under the stat-
ute, in part because it found
such liability could complicate
diplomatic relations and expose
American companies to similar
legal actions overseas. But
Tuesday’s case involved Ameri-
can companies, and Chief Jus-
tice John Roberts immediately
noted the distinction.

“In this case, no foreign
country has objected to the
United States hauling its own
citizens into its own courts, so
why should we be cautious in
terms of international rela-
tions?” he asked. “What objec-
tion would foreign countries
have to ensuring that U.S. cor-
porations follow customary in-
ternational law?”

The “potential for friction
militates against recognizing
foreign injury claims,” replied
Neal Katyal, the lawyer repre-

senting the defendant compa-
nies.

Justice Samuel Alito, along
with other justices, seemed re-
luctant to fully immunize Amer-
ican corporations for any hu-
man-rights abuses they might
commit overseas.

“Mr. Katyal, many of your
arguments lead to results that
are pretty hard to take,” said
Justice Alito.

“Suppose a U.S. corporation
makes a big show of supporting
every cause du jour, but then
surreptitiously hires agents in
Africa to kidnap children and
keep them in bondage on the
plantations so that the corpora-
tion can buy cocoa or coffee or
some other agricultural product
at bargain prices,” Justice Alito
said. “You would say that the
victims who couldn’t possibly
get any recovery in the courts
of the country where they had
been held should be thrown out
of court in the United States

where this corporation is head-
quartered and does business.”

“I don’t think your hypothet-
ical states a violation of the
Alien Tort Statute because
there is no domestic injury,”
Mr. Katyal said. More impor-
tant, he added, “your hypotheti-
cal does violate other statutes.”

While corporate liability is in
dispute, there is no legal ques-
tion that the Alien Tort Statute
permits lawsuits against indi-
viduals. Justice Elena Kagan
questioned that distinction.

“If you could bring a suit
against 10 slaveholders, when
those 10 slaveholders form a
corporation, why can’t you
bring a suit against the corpo-
ration?” she asked.

The case was originally filed
in 2005 over abuses that alleg-
edly began in the 1990s. Paul
Hoffman, the Hermosa Beach,
Calif., lawyer who represents
six plaintiffs alleging they were
enslaved on the plantations,

sought to minimize the implica-
tions of letting the suit proceed
under the Alien Tort Statute.

The suit alleges that Cargill
and Nestle aided and abetted
the violation of international
laws against child slavery.

“These corporations set up a
supply chain where they know
that cocoa beans are being
made by means of child-slave
labor,” Mr. Hoffman said, allow-
ing the companies to buy the
commodity cheaply and gain a
competitive advantage in the
U.S. market.

Other justices suggested that
Congress, rather than the
courts, was the better place to
seek more expansive liability
for child slavery.

“This case really is a case, I
think, about the proper role of
the judiciary as compared to
the proper role of Congress
here in fleshing out the Alien
Tort Statute,” said Justice Brett
Kavanaugh.

BY JESS BRAVIN

Court Hears Suit on Child-Slavery Liability

Nasdaq will make it so ‘every company has a very straightforward
way to meet the standards,’ said its chief, Adena Friedman.

S
IM

O
N
D
A
W
S
O
N
/B

LO
O
M
B
ER

G
N
EW

S

Page 16

A14 | Wednesday, December 2, 2020 THEWALL STREET JOURNAL.

sports safe or permissible. They will
play their next two home games in
Arizona.

Then the Denver Broncos were
forced to play Sunday without a
quarterback after their starter and
backups were sidelined by Covid-19
or contact tracing. The first and
second quarterbacks to take snaps
for the Broncos were technically
running backs. The third was a wide
receiver named Kendall Hinton who
had never played an NFL game but
played some quarterback in college.
He would complete more passes to
the other team than to his own
teammates.

The threadbare college football
season also threatened to unravel
as more than a dozen games were
postponed or canceled over the
weekend. Ohio State, No. 3 in the
AP poll, could miss the College
Football Playoff because it can’t get
enough games in. And when Ala-
bama destroyed Auburn, coach Nick
Saban was screaming at his televi-
sion from home: He tested positive
last week.

The start of the college basket-
ball season was no smoother. No. 1-
ranked Gonzaga had a positive test
in its traveling party before their
Thursday game, played that day
anyway, then held two players out
of their Friday game when one
tested positive and another was
quarantined as a close contact.

The NBA was preparing for what
might be the trickiest comeback in
sports. The league restarted its

paused 2019-20 season and made it
through the playoffs with zero posi-
tive cases among players inside the
bubble. They’re not doing it again.
When players balked at the idea of
spending a full season away from
home, the league rushed back for a
season that begins on Dec. 22.

What comes next for the NBA
might be much harder than con-
structing a bubble.

When teams received the new
health and safety protocols on Sat-
urday, they learned that anyone
who tests positive could be out for
at least 12 days. Those restrictions
mean that star players missing
weeks at a time is almost inevitable
for an indoor game that may be
more dangerous than most sports
in this pandemic.

The promise of vaccines was an
incentive for sports to play it safe
for the next few months. But when
the vaccine breakthroughs were an-
nounced in early November, the
NBA and other leagues had already
decided not to bubble again.

NFL executives and players never
thought it was feasible to bubble
players for the entire season, which
would have amounted to more than
half a year, and the league isn’t con-
sidering pausing the regular season
to build one now.

But there is no better excuse for
them to reconsider than the Super
Bowl, and the NFL is still in discus-
sions to create bubble environments
for the playoffs, a person familiar
with the matter said.

BY ANDREW BEATON AND BEN COHEN

Weather
Shown are today’s noon positions of weather systems and precipitation. Temperature bands are highs for the day.

City Hi Lo W Hi Lo W City Hi Lo W Hi Lo W
Today Tomorrow Today Tomorrow

City Hi Lo W Hi Lo W

Anchorage 36 19 sn 23 12 c
Atlanta 54 30 s 57 43 pc
Austin 64 37 pc 57 34 pc
Baltimore 48 32 s 54 38 s
Boise 40 20 s 38 18 s
Boston 46 35 pc 48 38 s
Burlington 40 30 sn 44 36 pc
Charlotte 54 29 s 59 39 s
Chicago 46 27 s 45 29 pc
Cleveland 40 26 pc 43 30 pc
Dallas 53 35 r 50 31 c
Denver 28 16 pc 39 21 s
Detroit 44 27 s 43 29 pc
Honolulu 84 70 pc 86 73 s
Houston 64 40 r 56 39 s
Indianapolis 44 26 s 44 31 c
Kansas City 47 31 c 38 26 c
Las Vegas 60 37 s 56 36 s
Little Rock 52 38 r 48 33 r
Los Angeles 73 50 s 71 46 s
Miami 74 62 s 76 67 pc
Milwaukee 47 29 s 43 29 pc
Minneapolis 39 25 pc 36 24 pc
Nashville 50 28 s 49 39 pc
New Orleans 65 58 s 69 51 t
New York City 46 38 pc 51 42 s
Oklahoma City 39 31 r 40 26 c

Omaha 43 22 pc 38 22 pc
Orlando 62 48 pc 74 57 c
Philadelphia 45 33 pc 50 38 s
Phoenix 70 47 s 67 44 s
Pittsburgh 38 23 pc 41 29 pc
Portland, Maine 41 31 pc 43 34 s
Portland, Ore. 47 35 s 47 35 pc
Sacramento 63 37 s 63 35 s
St. Louis 50 33 pc 44 32 sn
Salt Lake City 39 20 s 40 20 s
San Francisco 60 45 pc 60 44 s
Santa Fe 34 13 pc 37 15 s
Seattle 50 35 s 48 36 s
Sioux Falls 38 22 s 38 21 pc
Wash., D.C. 48 33 s 53 40 s

Amsterdam 43 40 pc 44 39 sh
Athens 59 48 pc 61 54 c
Baghdad 65 53 s 67 50 pc
Bangkok 85 75 pc 87 71 s
Beijing 39 17 pc 39 18 s
Berlin 35 24 s 33 27 pc
Brussels 44 40 pc 43 40 sh
Buenos Aires 81 65 t 80 61 s
Dubai 84 68 pc 83 72 pc
Dublin 45 35 pc 40 29 sh
Edinburgh 46 34 pc 39 29 sh

Frankfurt 37 31 pc 36 32 pc
Geneva 40 28 pc 37 31 pc
Havana 77 65 s 79 65 s
Hong Kong 75 59 s 71 56 s
Istanbul 50 44 c 57 45 s
Jakarta 91 76 t 88 77 t
Jerusalem 57 42 s 59 41 s
Johannesburg 82 53 s 73 55 pc
London 44 37 pc 43 35 sh
Madrid 51 26 pc 48 39 pc
Manila 84 76 sh 85 76 t
Melbourne 67 50 pc 76 55 pc
Mexico City 72 48 pc 74 47 c
Milan 38 31 r 42 34 pc
Moscow 25 18 pc 26 21 c
Mumbai 93 76 pc 92 75 pc
Paris 46 40 pc 44 41 r
Rio de Janeiro 81 75 t 89 79 pc
Riyadh 73 61 pc 77 63 pc
Rome 56 43 r 56 45 sh
San Juan 84 74 pc 83 73 sh
Seoul 42 25 pc 41 24 s
Shanghai 56 43 pc 52 41 pc
Singapore 87 78 t 87 78 sh
Sydney 77 62 pc 78 69 c
Taipei City 69 61 sh 68 62 r
Tokyo 50 48 r 56 48 pc
Toronto 39 30 s 40 33 pc
Vancouver 44 34 pc 45 38 c
Warsaw 30 25 s 35 31 c
Zurich 36 28 pc 36 26 pc

Today Tomorrow

U.S. Forecasts

International

City Hi Lo W Hi Lo W

s...sunny; pc... partly cloudy; c...cloudy; sh...showers;
t...t’storms; r...rain; sf...snow flurries; sn...snow; i...ice

Today Tomorrow

Warm

Cold

Stationary

Showers

Rain

T-storms

Snow

Flurries

Ice

<0

0s

10s

20s

30s

40s

50s

60s

70s

80s

90s

100+

l l
gAA h

Jacksonville

eLL k

CCh l tt

Louisville

Pittsb h

ew Y k
ySalt LLake CitCLLake CityL

Tampa

h ill

Memphishi

t

CityCity

D ll
P

Billings

PorP tl d

an

l d

Atl t

ew l
t

PPhSan Diego

Los AngeA l

LL
VegasV

ttl

. Pa.p /pls /

. LLo

gChicago

shington D.C.shington D Ch

t

Ch l t

kk rtford

hit

pdi

Cleve dd
l

A ti

k

q qAA b

hh

ityma Coma Cih CC ykl

an AA

es Moines

oux

Jack Birminghami h

pPhhil d l hih lyCheyenne

a Fe

C ddC
gp

Pierre

h dh

ghi hl i

T c

ynybbbA

Topek

C bb

gA tA

Ft. Worth

Eugene

p gSpringfield

bil

T t

pi

VV rygC ryC l

d t

Honolulu
Anchorage

Jacksonville

Little Rock

Charlotte

Louisville

Pittsburgh

New York
Salt Lake City

Tampa

Nashville

Memphis

Detroit

Kansas
City

Dallas
El Paso

Billings

Portland

Miami

San Francisco
Sacramento

Orlando

Atlanta

New Orleans
Houston

PhoenixSan Diego

Los Angeles

Las
Vegas

Seattle

Boise

Denver

Mpls./St. Paul

St. Louis

Chicago

Washington D.C.

Boston

Charleston

Milwaukee Hartford

Wichita

Indianapolis

Cleveland
Buffalo

Austin

Helena
Bismarck

Albuquerque

Omaha

Oklahoma City

San Antonio

Des Moines

Sioux Falls

Jackson Birmingham

PhiladelphiaCheyenne
Reno

Santa Fe

Colorado
Springs

Pierre

Richmond

Raleigh

Tucson

Albany

Topeka

Columbia

Augusta

Ft. Worth

Eugene

Springfield

Mobile

Toronto

Ottawa
Montreal

Winnipeg

Vancouver Calgary

Edmonton

70s40s
30s

20s

10s
20s0s

80s

70s70s

70s

60s60s

60s

50s

50s

50s

50s

50s

40s

40s

40s

40s
40s

30s

30s

30s
20s

20s

20s

BEASTLYBELONGINGS |
By David Alfred Bywaters

Across
1 It may be
troubling

5 Tiffany creation

9 Bring on

14 Unit of loudness

15 Gas leak
giveaway

16 “Isn’t it funny
how a bear likes
honey?” writer

17 Equine
gardening
equipment?

19 Novel features

20 In need of
massaging,
perhaps

21 Charge

23 Wonder

24 Works with
numbers,
perhaps

25 Walruses?

27 Remain unused

28 King succeeded
by Joffrey on
“Game of
Thrones”

30 Confined

31 Haw lead-in

32 Zap for a few
minutes

33 Weakens

34 Mice, maybe?

37 Makeup of
some keys

40 Col. neighbor

41 Saucer
occupant

44 Imitated
mindlessly

45 Out of the
lockup

47 “Not ___ bet!”

48 Bolos for boars?

50 Doorman’s
directive

52 De Armas of
“No Time to Die”

53 Dolt

54 Confessor’s
determination

55 Bad dog

57 Implement for
an amphibian?

59 Game with
numbers

60 “The First Lady
of Song”

TheWSJ Daily Crossword | Edited by Mike Shenk
1 2 3 4 5 6 7 8 9 10 11 12 13

14 15 16

17 18 19

20 21 22 23

24 25 26

27 28 29 30

31 32 33

34 35 36

37 38 39 40 41 42 43

44 45 46 47

48 49 50 51

52 53 54

55 56 57 58

59 60 61

62 63 64

Previous Puzzle’s Solution

s

Solve this puzzle online and discuss it atWSJ.com/Puzzles.

N A S A S C A M S G L U M
E D E N T O X I C A O N E
W H A T A R E N A S C O T
J E D I M I N D T R I C K
O R O O D E M A D G E
B E G A N T O P H O N O R S

S E E U K E W I T
L I G H T N I N G R O U N D S
O N O I C C S W F
T I T L E D E E D I O T A S
S T O O L R E N R U N

S O M E T H I N G T O D O
A B E T L E A V E E P I C
F R E E S A L E M M E T A
T O D D E M E R Y P S S T

61 Being in
Burgundy

62 Pass, in a way

63 Cease to labor

64 Tear

Down
1 Wisconsin city
with a rhyming
name

2 Marshmallow-
chocolate-
graham cracker
confection

3 Coming

4 Egg holders

5 Suffers a
disadvantage

6 Ritalin’s target,
briefly

7 Stock answer?

8 Be partial to

9 Drive forward

10 Zero

11 Hidden, like a
Klingon starship

12 Tease out

13 Takes umbrage
at

18 Without end

22 Take in

25 Harry Potter,
Cedric Diggory
and Cho Chang,
in Quidditch

26 Mud bath
purveyors

29 Gen., Ex. and
Lev., e.g.

33 Wine vessels

34 Bounders

35 Destination
after the ER
and OR

36 Attacked with
a sword

37 Qualified

38 It’s just what
you think

39 Meet at the
shore?

41 Suggest

42 Startup valued
at over a billion
dollars

43 Like some den
walls

45 Bro’s sib

46 Annoy
persistently

49 The Chariot,
the Tower or
the Lovers, e.g.

51 Western,
informally

54 Buds

56 And the like,
briefly

58 Iberian cheer

FR
O
M

TO
P:

EL
S
A
/G

ET
TY

IM
A
G
ES

;
D
A
V
ID

B
U
TL

ER
II
/R

EU
TE

R
S

The Games GoOn but It’s Getting Ugly
Leagues are trying to plow ahead as outbreaks and postponements are making it harder to proceed

SPORTS

T
he top men’s college bas-
ketball team in the coun-
try played through a
spate of Covid-19 cases
among players and staff

on Thanksgiving weekend. The No. 1
college football team took the field
for its most anticipated game with-
out the sport’s most famous coach.

And now the NFL has shut down
most of its facilities for two days as
one team had to play without a
quarterback, another was kicked
out of its home and a third had a
game delayed three different times.

The latest coronavirus surge has
crashed into the sports world again
and is slowly disabling the leagues
that are in season. The industry
faces the same problem it did when
sports came to a halt in March—
only this time leagues are trying to
bulldoze through the pandemic.

It was almost nine months ago
when leagues across the country
looked at this situation and came to
the opposite conclusion. A surreal
night in the NBA led to an abrupt
shutdown. Major League Baseball
players were sent home from spring
training. The NCAA tournament was
called off, the Masters was post-
poned and the 2020 Olympics be-
came the 2021 Olympics.

The last time the pandemic was
this grim, sports had no
choice but to stop. It re-
started with extraordinary
safety protocols over the
summer—driven to protect
billions of dollars in televi-
sion contracts at a time
when ticket sales revenue
disappeared.

Now cases and hospital-
izations per day in the U.S.
have reached new highs, but
the economic imperatives for
the leagues haven’t changed.
This time, with all that
money at stake, the sports
world isn’t stopping.

“It’s very, extremely clear
that we as a country, com-
munity and state have to do
what we can,” said Jeffrey
Smith, a doctor, lawyer and
the executive officer of Santa
Clara County, which insti-
tuted restrictions banning
the San Francisco 49ers
from practicing or playing at home.
“Otherwise hundreds of thousands
of people are going to die.”

This defiance is the latest sign of
how sports have reflected American
behavior throughout the pandemic.
In March, when sports were sus-
pended overnight, a frightened na-
tion stayed home. In the summer,
when sports returned with strict
protocols, a fatigued country tried
inching back to normalcy. Now, as
sports keep playing through can-
celed games and closed facilities,
unprecedented swaths of the U.S.
are sick with the virus and sick of
the virus.

Scientists know more about how
the coronavirus spreads and doc-

tors know more about how to treat
Covid-19, but health experts warned
that Thanksgiving would accelerate
the spread, and the Centers for Dis-
ease Control and Prevention urged
Americans to stay home. But there
was one group of people that par-
ticipated in the traditional holiday
pageantry: sports teams.

The NFL had managed to make it
through most of its season with few
disruptions—but now faces a series
of simultaneous calamities that has
the league teetering.

A matchup between the Balti-
more Ravens and Pittsburgh Steel-
ers that was supposed to be played
in prime time on Thanksgiving was
postponed to Sunday, then again to

Tuesday, then again to Wednesday
because of Baltimore’s outbreaks
that sidelined more than two dozen
players and personnel.

NFL commissioner Roger Goodell
canceled most in-person activities
for most teams on Monday and
Tuesday because of the “continuous
increase in positivity rates through-
out the country, as well as our un-
derstanding that a number of play-
ers and staff celebrated the
Thanksgiving holiday with out-of-
town guests,” he wrote in a memo.

That was only the beginning of
the NFL’s problems.

The San Francisco 49ers were
left homeless after Santa Clara
County no longer deemed contact

The Seattle Seahawks and Philadelphia Eagles, above, played a Monday Night
Football game on Nov. 30. Left, Virginia Tech upset No. 3 Villanova on Nov. 28.

Page 17

THEWALL STREET JOURNAL. Wednesday, December 2, 2020 | A15

A Big-Thinking
Executive
Presidents, Populism, and the Crisis of
Democracy
By William G. Howell and Terry M. Moe
(Chicago, 269 pages, $18)

BOOKSHELF | By Philip Wallach

It’s a curious irony. Those who have constantly warned ofDonald Trump’s authoritarian menace are naturallyattracted to proposals that limit executive power and
revitalize the separation of powers. Yet when those same
observers envision a Biden-Harris administration stuck with
a Republican-controlled Senate, they yearn for a presidency
with far more power, not less. William Howell and Terry Moe,
professors of political science at the University of Chicago and
Stanford respectively, appear to solve this paradox in “Presi-
dents, Populism, and the Crisis of Democracy.” Mr. Trump’s
brand of populism, they argue, presents an existential threat
to American democracy, and there is every reason to expect
imitators after Mr. Trump leaves the stage. But this populism

thrives only because America’s
government is so woefully
ineffective at dealing with the
serious challenges of modern
life. Our best chance to make it
more effective, in their view, is
to build up the big-thinking
presidency at the expense of a
myopic and parochial Congress.

As in their previous book,
“Relic: How Our Constitution
Undermines Effective Govern-
ment and Why We Need a More
Powerful Presidency” (2016),
the authors position themselves
as heirs to Progressive Era
reformers who championed
effective government. They are
unashamed Wilsonians, sharing

with the scholar-turned-president the conviction that, as the
only federal official elected by the whole nation, the president
is the only reliable champion of the common good in our
national government. Elected representatives, in that view, are
hopelessly beholden to the special interests of their districts.
Since this characteristic flows naturally from their place in our
Constitutional design, it cannot be cured by anything as simple
as overcoming polarization or getting money out of politics.

We should regard our antique Constitution as an obstacle
to good governance, not an object of reverence, they assert.
If we are unlikely to replace it entirely, we can nevertheless
rebalance it by means of an amendment that empowers presi-
dents to propose legislation, which would then have to receive
a quick up-or-down vote from Congress. This “universal fast-
track authority” would give presidents the chance to match
the legislative agenda to the pressing needs of society. Presi-
dents so empowered would have clear accountability and
would therefore handle the many problems of modernity our
current system has neglected. The populist threat would ebb.

Messrs. Howell and Moe write with clarity and verve. “In
today’s political ecosystem,” they write in one typical aside,
“libertarians have all the relevance of the dodo bird and
Steller’s sea cow.” And it is hard to object to their overarching
goals of institutionally reforming our dysfunctional politics
and improving the quality of our governance.

But the book’s central argument depends on a sleight of
hand regarding the nature of populism. Populism arises, they
say, because of a political system’s genuine failings, especially
in response to “globalization, technological change, and
immigration, which unleashed profound socioeconomic
disruptions of jobs, economic security, and the traditional
culture of the white working class.” But while populists are
right to point out these problems, they are uninterested in
solutions. Since their success depends on stoking resentments,
they are perfectly happy to see government flail, or to go along
with “orthodox Republican” opposition to useful programs.

The populists’ “antisystem” tendencies, Messrs. Howell and
Moe conclude, make them dangerous. But the authors give a
pass to other politicians who rail against moneyed interests
and a sellout political class—Elizabeth Warren, Bernie Sanders.
Since these politicians present “well-defined policy platforms
aimed at solving social problems,” they’re OK.

Messrs. Howell and Moe try to avoid the charge of using a
double standard by listing tactics employed by populist
demagogues: “emotional oratory,” “promising the impossible,”
“folksy posturing,” “gross oversimplification.” These sound like
ordinary politics. One wonders what they make of Joe Biden’s
promise to cure cancer, or to banish Covid-19 simply by
“listening to the scientific experts.”

The authors seem to think it’s obvious what problems our
federal government should solve, but the truth is that much of
our political conflict is over which problems deserve govern-
ment’s attention. The rancorous protests of 2020 suggested
that police abuse and systemic racism are the most pressing
problems for some, but neither appears anywhere in the book.
What Messrs. Howell and Moe appear to want is a basically
populist policy agenda carried out by Democrats. That may be
good political strategy, but it is anything but uncontroversial
on the left, where many hope that “deplorables” get their
comeuppance rather than government solicitude.

One could read Messrs. Howell and Moe’s book as an
attempt to bolster the technocratic camp in ongoing intra-
party struggles among Democrats. That would help explain
why they cartoonishly paint the GOP as the “organized means
by which populism in America finds expression and exercises
power” and Democrats as would-be saviors concerned with
the national good. But perhaps they are genuinely oblivious
to the ways in which their own argument partakes of the very
antisystem impulse they vehemently denounce in populists.
“Parochial,” for them, is a dirty word; all interests are
dismissed as “special” when compared to the good work of
solving big problems with big new programs. They stop
short of branding defenders of our current system as
enemies of the people, but they are headed in that direction.

The authors seem ready to reject the venerable American
tradition of pluralism—an increasingly common move for
those on the left who question their opponents’ legitimacy.
They are sure the country made it through the 20th century’s
fiercest challenges mainly because it had dynamic presidents.
All that business about deliberation and self-government, they
think, is mere sentimentalism—and one suspects they’ll soon
use much stronger language in denouncing the Senate. Call me
a sentimentalist, but I’ll stick with our rickety old Constitution.

Mr. Wallach is a resident scholar at the American Enterprise
Institute.

The U.S. Constitution, a pair of political
scientists contend, is not a document to be
revered but an obstacle to good governance.

Liberty’s Last Line of Defense

N ew administrations ofboth parties have a ten-dency to try to accom-
plish their policy goals by ex-
ecutive decree. As the rush of
a campaign meets the reality
of governing, incoming presi-
dents and staffers grow frus-
trated with the messy details
of bicameralism and present-
ment—sign-off from both
chambers and the president—
required to enact new laws.
Having served in the Senate, I
can understand the frustra-
tion.

But who is there to protect
and defend the rule of law
from an overeager new admin-
istration? State attorneys gen-
eral, who are the last line of
defense against federal over-
reach.

I served as Alabama’s attor-
ney general. I’ve witnessed
the power of state attorneys

general when they unite to de-
fend the Constitution and rule
of law against edicts from ex-
ecutive-branch officials and fi-
ats of unelected bureaucrats.
State attorneys general have
pushed back on the federal
government’s clear over-
reaches in the Affordable Care
Act’s contraceptive mandate,

the Clean Power Plan, and the
Waters of the United States
rule when they threatened
Americans’ liberties.

Attorneys general fall down
in this duty when they prac-
tice partisanship—as did
those who participated in the

past four years of the “resis-
tance.” These attorneys gen-
eral rushed to court as a
means to issue press releases
or make political appearances
in the media against their par-
tisan opponents or in support
of their political agendas. At-
torneys general serve the na-
tion best by making meritori-
ous arguments grounded in
the law.

When I served as Alabama’s
attorney general and then as
chairman of the Republican
Attorneys General Association,
the mandate was simple: Look
to the Constitution, the law as
written and the precedent.
That is the attorney general’s
role—to make sure the law is
followed, not craft his own.

Most every state now
boasts an office of solicitor
general, stocked with top-
flight lawyers who choose to
serve in their state capitals,
making arguments in federal

courts to defend the rights of
the states and their citizens.
Over the course of the past
four years, President Trump
appointed 28 of these solici-
tors general and other high-
level staff to the federal bench
at the district and circuit lev-
els. Thirteen alumni of state
attorney-general offices were
on the president’s Supreme
Court list.

As the new administration
takes shape over the coming
weeks and as a new crop of
officials try their hand run-
ning the behemoth that is the
federal government, state at-
torneys general will be watch-
ing. They stand poised to act
as the defenders of the rule of
law on behalf of their constit-
uents.

Mr. Strange, a Republican,
served as Alabama’s attorney
general (2011-17) and a U.S.
senator (2017-18).

By Luther Strange

State attorneys
general best serve
when they eschew
partisanship.

OPINION

As the 116th
Congress en-
ters its final
weeks, I have
a suggestion
for House and
Senate lead-
ers: Take a
break from
nonstop poli-
tics and focus
on the needs

of the country. On Tuesday a
bipartisan and bicameral
group of legislators proposed
a $908 billion emergency
Covid relief package to get the
American people through a
difficult winter. Leadership
should take up this bill
immediately.

Thanks to the accelerated
development of safe and ef-
fective vaccines, for which the
Trump administration de-
serves substantial credit,
there is reason to hope that
the economy and society will
have moved substantially to-
ward normal by next summer.
The task right now is to help
as many Americans as possi-
ble navigate the intervening
months with their lives and
livelihoods intact.

In the early weeks of the
pandemic, Congress came to-
gether to pass the Cares Act,
which provided vital assis-
tance to unemployed Ameri-
cans, small businesses and
state and local institutions.
Without this legislation, many
millions would have been left
destitute and entire catego-
ries of businesses would have
been decimated.

Unfortunately, many im-
portant provisions of this law
will lapse at the end of the

A Christmas Compromise on Covid Relief?
year, and negotiations among
the White House and leaders
in the Senate and House have
stalled. Meanwhile, more
than 10 million Americans
soon face the loss of unem-
ployment benefits and health
insurance. Millions of others
face the threat of eviction
from their homes in the new
year. Some 26 million Ameri-
cans reported not having
enough to eat during the past
week. In cities across the na-
tion, lines stretch at food
banks struggling to find the
resources and volunteers to
meet the demand.

Without further assis-
tance, tens of thousands of
small businesses will soon be
forced to close their doors
for good. Schools will be un-
able to reopen because they
lack tests, protective equip-
ment and updated ventilation
systems. Hospitals face
shortages of beds, equipment
and trained staff, even as
they absorb billions of dol-
lars in uncompensated care.
With case spiking yet again,
patients could soon be dying
in hospital corridors, as they
did in the spring. In the af-
termath of the Thanksgiving
and Christmas holiday, the
situation could turn even
worse.

State and local govern-
ments faced revenue losses of
at least $70 billion in fiscal
2020, rising to an estimated
$268 billion in 2021 and $312
billion in 2022, according to a
recent report in this newspa-
per. As revenues plummet,
these jurisdictions have been
forced to spend tens of bil-
lions of dollars to deal with

the health crisis. Because most
are prohibited from running
deficits, they have responded
the only way they can—by
drawing down reserves and
cutting services, including po-
lice, firefighters and other
first responders as well as
transportation and social ser-
vices. Over the past year, state
and local employment has de-
clined by 1.2 million.

Even with widespread pub-
lic cooperation, vaccinating a
critical mass of Americans
will take months. Meanwhile,
there is much to do that could
mitigate the effects of the cri-
sis. Elected officials can build
a financial bridge to a post-
pandemic world and help tens
of millions of Americans keep
food on the table, a roof over
their heads, their businesses
in operation, and essential
services functioning until the
middle of 2021, when mass
distribution of vaccines will
finally begin to end this
scourge.

None of this is—or should
be—controversial. Elected of-
ficials came together across
party lines to do all these
things less than nine months
ago. Yes, it cost an eye-pop-
ping amount of money. But
most Americans believe it was
worth it. According to a re-
cent survey, 74% of Ameri-

cans, including 56% of Repub-
licans, want Washington to do
more.

They’re right. Government
exists to do what individuals,
voluntary associations, and
markets cannot, and to assist
state and localities in such ex-
tenuating circumstances. As in
war, the scope and duration of
government’s emergency re-
sponse should be driven by
the facts on the ground, not
politically driven timetables
and spending limits.

The outlines of a bipartisan
compromise have been clear
for months. On Tuesday the
House Problem Solvers Cau-
cus and a bipartisan group of
senators came together to
propose a four-month emer-
gency package. Much of the
bill’s $908 billion is repur-
posed from the Cares Act. The
bill provides substantial allo-
cations for unemployment in-
surance, small business, states
and localities, health care,
vaccine distribution, educa-
tion and transportation.

If House and Senate leader-
ship won’t bring this bill to
the floor, the bipartisan group
of legislators should use exist-
ing procedures to force a
vote, either as a free-standing
bill or as an amendment to
legislation such as the con-
tinuing resolution to fund the
government. And they should
make it clear that they will
vote against adjourning until
relief has been passed. To
leave Washington without ac-
tion on a Covid-19 package
would be a dereliction of duty
and, as Virginia Sen. Mark
Warner put it on Tuesday,
“stupidity on steroids.”

Americans need help
only government can
provide to weather
the next few months.

POLITICS
& IDEAS
By William
A. Galston

A curious
email arrived
after Satur-
day’s col-
umn, from a
state official
overseeing
medical care
for millions
of Medicaid
bene f i c i a -
ries, includ-

ing nursing-home inmates, in
a state whose nursing-home
deaths from Covid-19 are
nothing to brag about.

I will withhold his name,
but he said my column was
“ill-informed,” “inaccurate”
and “unscientific rubbish”
without stating any claim that
he was disagreeing with.

He suggested I had gotten
my information from Steve
Bannon and Ben Carson,
though I mentioned neither
man. Apparently because I
cited a Senate hearing on
treating early-stage Covid
with a variety of drugs includ-
ing hydroxychloroquine, he
wrote: “I suggest if infected
you pledge to stay home, take
hydroxychloroquine, and not
go to the hospital for more in-
tensive treatment.”

This person is a medical
doctor. I asked if he told sta-
tin users they should refuse
treatment if they went on to
develop severe coronary dis-
ease. No response, though he
did acknowledge a list of
sources I provided for every
statement in my column.

I mention him because
what rang through his email
was histrionic, unreasoning
denial of a highly representa-
tive sort. In reality, my col-
umn was a statement of the
obvious, you might even say

We Decide How Much Covid
the culpably obvious. When a
disease spreads more easily
than the flu, by people with
few or no symptoms, it will be
“extremely difficult” to con-
tain, to use the recent admis-
sion of Anthony Fauci.

Our testing will be lucky to
catch one case in 10, to use
the estimate of CDC’s Robert
Redfield during the summer
surge.

It was always going to fall
to 330 million Americans, as
it clearly has, to heed advice
and do the best they can to
limit the damage of a virus
that can’t be controlled by of-
ficials exercising their elected
powers.

The fault for delaying and
burying this message lies not
only with President Trump
saying the virus was “under
control,” New York Mayor Bill
de Blasio saying, “We’ve got a
long time to ramp up,” or Cal-
ifornia Gov. Gavin Newsom
saying the “protocols have
been perfected” (whatever
that was supposed to mean).

Even today, every media in-
stitution, university and the
Covid Tracking Project, with
their obsessive focus on con-
firmed (i.e., visible) cases,
give the public the wrong idea
about a disease that is wide-
spread and invisible.

In its great deconstruction
of the fiasco in Bergamo, Italy,
the New York Times on Mon-

day pointed to the foolish
early guidance given to doc-
tors: When confronted with
unexplained pneumonia, don’t
check for Covid unless the vic-
tim can be positively linked to
China. It’s hard to imagine
more terrible advice,
as if the goal were
protecting our-
selves from the
knowledge of any
spread not linked
to China. Yet this
was the U.S. ap-
proach as well.

Most people
with flu-like symp-
toms never see a
doctor. We should have con-
sidered the virus rampant in
the U.S. even before any cases
had been identified. When I
pointed all this out in late
January, I was channeling
what any epidemiologist
would have told you the day
before Covid happened. The
only mystery is why we de-
cided to forget everything we
knew about the flu-like pan-
demic we had spent decades
preparing for.

For one thing, the “long,
dark winter” everybody talks
about can still be lighter and
shorter. Individuals can stop
transmitting the disease if
they choose to. The truth is,
most of our activities don’t
require crowding together
and breathing in each other’s
mouths and nostrils or show-
ering each other in spittle.

It’s not impossible to avoid
Covid even if people around
you have it. Even workers
with public-facing jobs have
shown they can do it. And the
incentives become stronger
with a vaccine a few weeks or
months away, which means

the costs and inconveniences
won’t have to be borne much
longer.

It’s bracing to consider that
if deaths today were 100,000
instead of 250,000, our ran-
corous politics and media

would not reflect that we
had just saved 150,000
lives. There was never
going to be a good
outcome from Covid,
but any situation can
be improved. The
time-honored prophy-
lactic for panic is ac-

tionable information. Un-
fortunately, in their own

panic, our officials encouraged
the first surge by suggesting
they could control the disease,
then tried to redress their er-
ror with unsustainable lock-
downs. We’ve been on the
seesaw ever since.

A realistic assessment of
the U.S. role in the 2008
global financial panic never
came; instead we got a silly
government report that said
bad things happened because
officials didn’t prevent them.
I fear the same will happen
with Covid-19. The angry deni-
alism of my email friend from
an undisclosed state medical
agency shows why. Our big-
gest failure can’t be discussed.
It consisted of not leveling
with the American people
sooner, about a risk they
would have no choice but to
manage without government
wand-waving to make it all
OK.

By the way, I withhold my
correspondent’s name on the
assumption that he is not the
idiot his email, or his subse-
quent legal threats, indicate.
For the sake of his state, I
hope I am not wrong.

TheU.S. promoted
the illusion of control
instead of the wisdom
of riskmanagement.

BUSINESS
WORLD
By Holman W.
Jenkins, Jr.

AL DRAGO/
BLOOMBERG

Page 31

THEWALL STREET JOURNAL. * * * * Wednesday, December 2, 2020 | B11

Share-price and index performance this year

Source: FactSet

S&P 500

HCA
Healthcare

Universal
Health
Services

Tenet
Healthcare

10

–70

–60

–50

–40

–30

–20

–10

0

%

J F M A M J J A S O N D

AUCTIONRESULTS
Here are the results of Tuesday's Treasury auction.
All bids are awarded at a single price at themarket-
clearing yield. Rates are determined by the difference
between that price and the face value.

52-WEEKBILLS
Applications $131,770,818,100
Accepted bids $38,987,756,200
" noncompetitively $275,794,500
" foreign noncompetitively $0
Auction price (rate) 99.888778

(0.110%)
Coupon equivalent 0.112%
Bids at clearing yield accepted 82.59%
Cusip number 9127965G0

The bills, datedDec. 3, 2020,mature onDec. 2, 2021.

exchange has also traditionally
offered little diversity, with
miner Vale SA and oil com-
pany Petrobras accounting for
a little more than a fifth of all
shares in the Ibovespa.

But a combination of low
inflation and law that capped
federal government spending

two years ago. The new inter-
est in the market has paved
the way for a flurry of public
offerings, with 25 companies
going public so far this year,
the most in 13 years. The
São Paulo-based B3 exchange’s
benchmark index, the Ibove-
spa, is up more than 60% since
its March low.

“The growth surprised us a
lot,” said Gilson Finkelsztain,
chief executive of the B3.

The trend accelerated as
stocks plunged in March but
has continued even as the
Ibovespa recovered—the index
was up about 16% in Novem-
ber, its best month in four
years. For the year through
Nov. 30, it was still down
about 6%.

Brazil’s stock market has
long struggled to attract local
investors. With interest rates
as high as 14% here only four
years ago, investors had little
reason to abandon profitable
fixed-income investments to
venture into stocks. The stock

have allowed the central bank
to gradually chip away at the
interest rate, transforming
Brazil’s investment culture.
The pandemic accelerated
that trend, prompting the cen-
tral bank to cut the rate to 2%
in August. In 2016 it was
14.25%, then one of the
world’s highest.

Despite concerns about Bra-
zil’s deteriorating fiscal
health, the government has
rolled out stimulus amid the
pandemic, amounting to 8.3%
of output, which has helped
buoy the economy and in-
jected confidence into the
stock market.

Many new investors are
getting their information from
social-media accounts cen-
tered on finance, with fund
managers, academics and ama-
teur investors offering guid-
ance from tips on the latest
stock to how to invest for the
first time.

Thiago Nigro, 30 years old,
who goes by the social-media

handle Rich Cousin and is a
partner at the São Paulo bro-
kerage XP Inc., has amassed
four million followers on You-
Tube covering themes such as
whether a stock is cheap or
not. Wearing a T-shirt and
seated in front of a laptop, he
walks viewers through finan-
cial scenarios while perform-
ing calculations on spread-
sheets. In one 21-day series of
videos, tens of thousands
woke up at 5 a.m. for a sort of
investing boot camp.

Another XP part-
ner, Ana Laura Magalhães,
who is 29, takes on topics that
may sound impenetrable—
from defining debentures to
how to analyze corporate bal-
ance sheets.

Prospective investors so
value her advice that she has
nearly a combined 250,000
followers on Instagram and
YouTube.

“Talking about money was
a taboo before,” said
Ms. Magalhães, who is so well

known that organizers at a
rock concert last year up-
graded her to the VIP section
upon recognizing her. “Brazil-
ians are not used to investing
their money.”

Investing in stocks is risk-
ier and more volatile than
bonds, since their returns are
closely linked to the health of
the economy.

Right now, equity returns
are soaring—not just in Brazil,
but globally, boosted by coun-
tries’ pandemic stimulus pack-
ages.

Yet Brazil’s initial package
was “so high it’s not some-
thing you can sustain,” said
Claudio Ferraz, an economist
and Brazil expert at Canada’s
Vancouver School of Econom-
ics.

There is also the risk of
fraud and misinformation,
with a largely novice investing
class and brokerages and
banks bombarding people with
commercials and social-media
content.

RIO DE JANEIRO—Since the
coronavirus pandemic hit,
many Brazilians have fled to a
place they don’t normally go:
the country’s stock market.

Markets are up around the
world despite the pandemic
and economic concerns,
buoyed by low interest rates.
When Brazil’s central bank
pushed interest rates down to
a historic low of 2% amid
Covid-19, it sparked a particu-
larly large shift among Brazil-
ians, who are swapping their
dwindling fixed-income invest-
ments for stocks for the first
time.

Fueling the trend are social-
media stars who have boosted
the market by giving younger
Brazilians the confidence to
try their luck with equities.

A million new investors en-
tered Brazil’s stock market
since March and there are now
three times as many investors
in the market as there were

BY VINOD SREEHARSHA

Global Stock-Market Fever Spurs Reluctant Brazilians to Invest
Performance, year to date

Source: FactSet

10

–50

–40

–30

–20

–10

0

%
S&P 500

Bovespa

Jan. April July Oct.

closing out its best month since
1987.

Despite the tumult of 2020,
the S&P 500 is up 13% for the
year, while a surge in technol-
ogy shares has helped the Nas-
daq soar 38%.

Small stocks also extended

their recent gains, with the
Russell 2000 index rising 0.9%
after posting its best monthly
gain yet in November.

Tuesday’s gains were broad,
with 10 of the S&P 500’s 11 sec-
tors rallying. A range of stocks
has powered the rally, leaving

MARKETS

can get back to quote-unquote
normal.”

Advances toward protecting
populations against the corona-
virus continued to be a focus.
The European Union’s chief
medicines regulator said that
Pfizer partner BioNTech and
drugmaker Moderna both ap-
plied for their coronavirus vac-
cines to be approved in the EU.

In another potential positive
sign for markets, negotiations
in Washington over additional
coronavirus relief showed signs
of resuming. Investors have fol-
lowed developments that could
lead to more economic stimu-
lus.

The S&P 500 gained 40.82
points, or 1.1%, to 3662.45, its
27th record close of 2020. The
tech-heavy Nasdaq Composite
advanced 156.37 points, or 1.3%,
to 12355.11, its 46th record
close of the year. The Dow
Jones Industrial Average added
185.28 points, or 0.6%, to
29823.92, after on Monday

major indexes less reliant on a
few highflying companies to lift
them.

The broadening of market
participation is a healthy sign,
said Lauren Hill, portfolio man-
ager at Westwood Holdings
Group. “I think that means that
more people believe that the
recovery is taking shape with
the vaccine announcements
that we’ve had in the last few
weeks,” she said. “People are
looking ahead to 2021 with op-
timism.”

Among individual stocks,
Tesla shares rose $17.16, or 3%,
to $584.76 after S&P Dow Jones
Indices said it would add the
car maker’s full weight to the
S&P 500 in one move before the
start of trading on Dec. 21.

Shares of Zoom Video Com-
munications dropped $72.05,
or 15%, to $406.31. The video-
conferencing company on Mon-
day signaled that higher sales
in recent months have come
with higher costs, disappoint-

ing investors.
Overseas, the pan-continen-

tal Stoxx Europe 600 rose 0.7%.
Surveys on manufacturing ac-
tivity in many major European
economies showed a broad con-
tinued expansion in the euro-
zone.

“The manufacturing sector
is one part of the European
economy that is actually man-
aging to retain some degree of
resilience,” said Michael
Hewson, a chief markets ana-
lyst at CMC Markets.

In Asia, most major bench-
marks rose by the close Tues-
day. The Shanghai Composite
Index added 1.8%, Hong Kong’s
Hang Seng advanced 0.9% and
Japan’s Nikkei 225 climbed
1.3%. A private gauge of manu-
facturing activity in China hit
its highest level in a decade in
November. At midday Wednes-
day in Tokyo, the Nikkei was
down 0.1% and the Hang Seng
was down 0.2%. U.S. stock fu-
tures were off 0.3%.

The S&P 500 and Nasdaq
Composite rose to records, as
the optimism behind the No-
vember market rally extended
into a new month.

Investors have been heart-
ened in recent weeks by prom-
ising reports on the effective-

ness of coming
vaccines in
protecting peo-
ple from

Covid-19. The strong results
have raised hopes that indus-
tries hurt by the pandemic may
recover more quickly than pre-
viously thought.

“That news was so much
more positive than I think peo-
ple expected,” said Elliott Sav-
age, portfolio manager of YCG
Enhanced Fund. “To have two
come out that were 90 and 95%
effective, I think that just was a
very big change in expectations
for how quickly the economy

BY KAREN LANGLEY
AND ANNA HIRTENSTEIN

S&P 500, Nasdaq Advance to Records

TUESDAY’S
MARKETS

Healthcare personnel in a room for patients with the coronavirus in Kansas. Shares of hospital systems have risen this year.

CA
LL
A
G
H
A
N
O
’H
A
R
E/
R
EU

TE
R
S

U.S. government-bond yields
climbed to a three-week high
following a renewed congres-
sional effort to send aid to
businesses and municipalities
hurt by the pandemic.

The yield on the benchmark
10-year Treasury note finished

the session at
0.933%, up from
0.845% Monday
and its highest

close since Nov. 10, according
to Tradeweb. The 30-year
Treasury bond yield rose to
1.675% from 1.574%

Yields, which rise when
bond prices fall, rose after a
bipartisan group of U.S. law-
makers proposed a $908 bil-
lion relief bill that would fund
measures through the end of
March.

Higher government spend-
ing tends to push up Treasury
yields by boosting economic
growth and inflation, making
fixed payments from bonds
less attractive.

Previous stimulus efforts
pegged potential packages at
more than $1 trillion. In No-
vember, the Treasury Depart-
ment dialed back its estimates
for government borrowing
through the end of the year.

Yields have climbed in recent
sessions, though they remain
near historic lows.

One factor suppressing a re-
bound is the Federal Reserve,
which has committed to aiding
the economy by holding bor-
rowing costs low: keeping
short-term interest rates near
zero and buying up billions of
dollars of bonds.

BY SEBASTIAN PELLEJERO

Treasury
Yields
Rise on
Aid Talks

DowJones
Industrial
Average

+0.6%

S&P 500

+1.1%

Nasdaq
Composite

+1.3%

Index performance, Tuesday

Source: FactSet

1.6

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

%

9:30 10 11 noon 1 2 3 4

CREDIT
MARKETS

down again, we think these
companies can deliver on ex-
pectations and even exceed
them. And that should be suf-
ficient to at least relatively
outperform the market over-
all.”

Driving the optimism
around hospital and health-
care facilities, analysts and in-
vestors say, is increased clar-
ity about the months ahead.
Although two key Senate seats
in Georgia won’t be decided
until the January runoff elec-
tion, many traders are antici-
pating that the government
will remain divided—an out-
come that reduces the chances
of a major health-care over-
haul.

And statements from some
of the Supreme Court’s con-
servative justices suggest the
Affordable Care Act may sur-
vive its latest test, a case ar-
gued last month by Republi-
can-leaning states seeking to
challenge it.

The survival of the Afford-
able Care Act—combined with
a gridlocked government—
would make it unlikely that
health-care policy will sub-
stantially change. That in
turn, analysts said, will be ad-
vantageous for hospitals,
which have benefited from
greater volumes of insured
patients.

“The [election] outcome
probably is as good as we
could have hoped,” said Whit
Mayo, managing director of
equity research at UBS. “The
[chance] of seeing more cover-
age is probably greater than
less coverage. And that’s al-
most always a good thing for
everyone in health-care ser-
vices.”

ContinuedfrompageB1

One of the biggest chal-
lenges for hospital systems in
the months ahead will be the
sharp climb in Covid-19 cases,
which public-health officials
expect will worsen in the com-
ing weeks as more Americans
test positive after traveling for
Thanksgiving. The U.S. re-
ported more than 135,000 new
coronavirus infections Sunday,
according to the Covid Track-
ing Project, and hospitaliza-
tions surged to more than
93,000—a record.

The jump in cases threatens
to overtax hospital systems
again. But this time, investors
and analysts expect hospital
systems to better weather the
Covid-19 influx, thanks to a
deeper understanding of how
to treat the virus and how to
manage hospital capacity. And
unlike in the spring, when
states across the country im-
posed restrictions on elective
procedures, analysts anticipate
that local governments will in-
stead leave those decisions to
hospital systems.

Already, many hospitals
seem more willing to push
ahead with the profitable pro-
cedures that hospitals rou-
tinely conduct, especially after
many systems have enjoyed a

faster-than-expected rebound
in hospital visits for non-coro-
navirus patients. That—along
with cutting expenses, includ-
ing via furloughs and reducing
salaries at some companies—
has helped turn around hospi-
tals’ financial landscape.

Federal assistance earlier
this year, including $175 bil-
lion in direct aid approved by
Congress for health-care pro-
viders across the U.S., has also
delivered relief.

“I do think investors are be-
coming comfortable with the
fact that hospitals can operate
in a Covid environment and
that everything doesn’t have
to go into a complete shut-
down,” said Frank Morgan, a
research analyst at RBC Capi-
tal Markets.

Still, even with vaccine op-
timism, some analysts note
that the Covid-19 landscape
could shift sharply if out-
breaks significantly worsen in
the coming weeks.

Some nonprofit hospitals
have begun putting elective
surgeries on pause, and
health-care workers are anx-
ious about what could be a
sustained influx of patients af-
ter already enduring an unre-
lenting year.

Even so, investor sentiment
on hospital companies and the
overall health-care sector re-
mains positive. In its latest
survey released in November,
Bank of America said that
health care remains the most
overweight sector among fund
managers.

Recent options activity,
meanwhile, has indicated that
investors became increasingly
bullish on HCA and Universal

Health in November, com-
pared with the month before,
said Michael Khouw, chief in-
vestment officer of Optimize
Advisors. Activity in the op-
tions market implies that, on
average, traders expect a
nearly 7% increase in share
price for HCA by mid-March
and an almost 12% increase
for Universal Health by mid-
April, according to his data
analysis.

Hospital
Stocks
Rally

Increased clarity
about the months
ahead is helping the
sector.

Page 32

B12 | Wednesday, December 2, 2020 THEWALL STREET JOURNAL.

OPEC, Allies Face Lose-Lose Equation
The group of oil producers will encounter risks no matter which route they choose to take on output

OPECmembers andRussia's
estimated change in real GDP in
2020, change froma year earlier

Source: International Monetary Fund

–80% 0–60 –40 –20

Libya

Venezuela

Iraq

Kuwait

Congo

UAE

Equatorial Guinea

Algeria

Saudi Arabia

Iran

Nigeria

Russia

Angola

Gabon

HEARD ONTHESTREET
FINANCIAL ANALYSIS & COMMENTARY

The organization and its Russian-led partners have postponed a meeting until Thursday. A oil field in Russia.

A
N
D
R
EY

R
U
D
A
K
O
V
/B

LO
O
M
B
ER

G
N
EW

S

The economy is in for a tough
winter. But the manufacturing sec-
tor appears to have the where-
withal to push through it.

The Institute for Supply Man-
agement said Tuesday that its in-
dex of manufacturing activity came
in at 57.5 in November—a bit below
the two-year high of 59.3 it regis-
tered in October, but still a signal
that the sector is swinging higher.
Anything above 50 indicates a rise
in manufacturing activity.

The ISM’s gauge is a diffusion in-
dex, based on how many manufac-
turers say activity is expanding ver-
sus contracting, so it doesn’t directly
measure manufacturing output. A
Federal Reserve index does and it
shows that as of October manufac-
turing production was about 4.6%
below its level in February.

That is somewhat curious con-
sidering that, adjusted for infla-
tion, consumer spending in Octo-
ber was 2.2% shy of its February
mark, according to the Commerce
Department. And consumer spend-
ing on goods was 8.4% higher.

A reason for this disconnect is
probably that manufacturers’ cus-
tomers have been drawing down in-
ventories to keep up with demand.
Indeed, a separate index in Tues-
day’s ISM report showed manufac-
turers believe their customers’ in-
ventory levels are “too low” to the
most extreme degree in over a de-
cade. So even if final demand didn’t
rise any further, manufacturers
would still need to step up output to
bring inventories back into balance.

That dynamic could help insulate
them from what is looking like a
tough winter. With Covid-19 cases
rising and government support fad-
ing, it looks as if consumer spending
is starting to falter. With vaccines
unlikely to become widely available
until the spring at the earliest, some
economists are forecasting gross
domestic product to register a slight
contraction in the first quarter.

Furthermore, while manufactur-
ers’ customers could be in for a
difficult spell in the first quarter,
they will have to consider the jump
in demand they are likely to experi-
ence after vaccines become widely
available. Even if business slows,
they might want to start stocking
shelves a little more now. Winter
will be a dark season for the econ-
omy, but manufacturing could be a
bright spot. —Justin Lahart

The arrival of a vaccine is a
blessing for oil producers. Hopes
for a vaccine, however, are causing
a massive headache for members
of the global oil cartel and its Rus-
sian-led partners. Some of its
members—financially battered and
facing internal turmoil—are reach-
ing the end of their ropes.

The Organization of the Petro-
leum Exporting Countries met
Monday and was scheduled to
meet with Russian-led producers
Tuesday to decide whether to go
along with their next scheduled
production increase of two million
barrels a day, delay it for a few
months or opt for a smaller boost.
The market had priced in a delay.

In April, so-called OPEC+ agreed
to cut production collectively by
9.7 million barrels a day, with grad-
ual production increases every six
months. Tuesday’s meeting was
postponed until Thursday as the
countries try to iron out their dif-
ferences. Talks have become more
complicated as Brent crude prices
approached $50 a barrel on vaccine
optimism. While that isn’t high
enough for OPEC members to avoid
fiscal deficits, it makes some feel
antsy about forgoing revenue. After
briefly breaking above $49 a barrel
last week, Brent crude slipped be-
low $48 after the group failed to
reach consensus on Monday.

Take Iraq, OPEC’s second-largest
producer, which depended on oil for
92% of its revenue in 2019, accord-
ing to the World Bank. The country’s
gross domestic product is expected
to shrink this year to an extent not
seen since 2003, the year of the U.S.
invasion. As of October, the govern-
ment’s oil export revenue wasn’t

enough to cover public salaries, ben-
efits and other essential expenses,
according to S&P Global Platts. All of
that comes with the backdrop of an-
tigovernment protests that have
erupted since late 2019.

Iraq indicated last week that the
country is losing patience with the
OPEC+ imposed production cuts. It
isn’t alone. The country is one of
seven for which RBC Capital Mar-
kets has raised its gauge of geopo-
litical risk. The restless group in-
cludes Nigeria, which slipped into
recession and faces protests at
home as well, and even the rela-
tively well-off United Arab Emirates.

Despite differences, OPEC+ is
likely to work hard to come up
with a unified message, according
to Helima Croft, global head of
commodity strategy at RBC, noting
similar tensions haven’t been un-
common ahead of these meetings.

Whatever decision they arrive at
carries its own risks. If they go
against expectations, opting not to
moderate the cuts or choosing to
slowly increase production, it risks
undoing the price recovery the
group helped engineer since the
spring. The fact that OPEC+ has
been predictable so far this year
has heightened traders’ expecta-

The latest uncertainty comes at a
time of precarious demand recovery
as coronavirus cases climb globally.
Complicating matters, supply is
quickly recovering in war-torn
Libya, an OPEC member exempt
from current cuts, and drilling ac-
tivity is slowly resuming in the U.S.,
where local benchmark crude prices
are about $4 away from a price that
makes new drilling profitable for
the average producer.

Herding exporters into agree-
ment was much easier when
Covid-19 plunged all of them into
crisis. Discipline is fading now that
a recovery is in sight. —Jinjoo Lee

tions. Dashing them, even at the
margin, could cause market turmoil.

But if the group extends its cuts
as the market expects, or even
deepens them, the group risks com-
pliance issues from members that
are having trouble sticking to pro-
duction quotas. Iraq and Nigeria re-
peatedly exceeded agreed levels. If
OPEC+ members make 70% of their
agreed cuts in 2021 and 2022, then
average oil prices could fall as much
as $7 a barrel next year compared
with full compliance, noted Bassam
Fattouh and Andreas Economou of
the Oxford Institute for Energy
Studies in a recent post.

Production
Spurt

Has Room
To Run

Restaurants Have Less Under the Tree
Weak gift-card sales could be an obstacle to full recovery for chains like Cheesecake Factory

Casual dining stocks have almost
fully recovered from the pandemic.
One hurdle they still have to face: an
uncertain holiday season.

A resurgence in coronavirus
cases is hitting the industry cur-
rently. Seated diners at U.S. res-
taurants were down 48% from a
year ago as of Sunday, according
to data from OpenTable. Many in-
dependent restaurants closed as fi-
nancial pressures intensify.

Publicly traded sit-down restau-
rant chains are hardly worse for
wear: shares of Darden Restau-
rants, which owns Olive Garden and
other brands, are down about 9%
since a high in February, while
Cheesecake Factory stock is down
8% over that same period. Brinker
International, which owns Chili’s, is
up about 22% so far in 2020.

But the arrival of the holiday sea-
son means a big question for inves-
tors: Will shoppers buy gift cards
for the chains at the same rate?
More than half of annual gift-card
sales for the industry occur around
the holidays, according to Wells
Fargo Securities analyst Jon Tower.
Under U.S. accounting rules, restau-

rants book revenue from the gift
card when it is redeemed.

In 2019, according to Mr. Tower,
redemptions accounted for 14% of
first-quarter restaurant sales at
Outback Steakhouse parent
Bloomin’ Brands, and 9% at
Cheesecake Factory.

Hanging onto those sales could
be the difference between meeting

or missing sales and profit expec-
tations. This year, with reduced
foot traffic in malls, pharmacies
and other stores that sell cards,
there is a high risk that gift-card
sales will disappoint. What’s more,
with virus cases up, an evening
out at the local restaurant may not
make for an appealing gift.

At the same time, digital order-

ing options have made buying gift
cards on the web or via an app
much easier. Running a promotion
is also easier: Chili’s, for example,
is offering diners a $10 gift card
free with a $50 gift card purchase.
Many rivals have similar deals.

What is more, revenue from a
card can be recognized if a restau-
rant concludes it is unlikely to
ever be redeemed. Management
has wide latitude to set assump-
tions on expected redemptions, es-
pecially since business conditions
and consumer behavior have
clearly changed this year. That
should give some wiggle room if
sales or redemptions are lighter
than expected.

With safe and effective Covid-19
vaccines on the way, the industry
outlook is bright. Pent-up demand
for dining out should be very
strong, and the bleak outlook for in-
dependent restaurants means less
competition for diners and opportu-
nities to expand on favorable terms.

The coming year should be a very
good one for the industry, as long
as the holiday gift-giving season is
close to normal. —Charley Grant

OVERHEARD
As China’s heft grows, other

nations have become concerned
over its efforts to set the techni-
cal standards for emerging tech-
nologies like 5G.

Also, pickled vegetables.
In November, global industry

standards body ISO published a
document certifying the unique
properties of “pao cai,” a type of
Chinese fermented vegetable
similar to the Korean dish kim-
chi. After Chinese state media
labeled the achievement a China-
led international standard for
kimchi, South Korea’s agriculture
ministry said Sunday that inter-
national standards for kimchi
were agreed upon by the United
Nations in 2001 and that it was
inappropriate to lump in kimchi
with pao cai.

China and South Korea have
close tried ties, but relations are
often contentious. When it
comes to symbols of national
pride, Chinese and South Kore-
ans seem prone to get into a
pickle.

Bank Mergers Are No Panacea
Bankers love to think about

mergers, but they aren’t a simple
solution to the problems of Eu-
rope’s lenders, even within the
same country.

UniCredit shares plunged Tues-
day after Chief Executive Jean
Pierre Mustier said he was step-
ping down over a disagreement
about the strategic direction of It-
aly’s second-largest bank. A widely
respected figure, Mr. Mustier had
pushed back against board pres-
sure to do deals, favoring capital
returns to shareholders.

Last week, talks between Span-
ish lenders Banco Bilbao Vizcaya
Argentaria and Banco de Sabadell
collapsed due to disagreements
over pricing, also highlighting the
shaky case for deals.

Bank mergers have long been
seen as a way for European lend-
ers to boost profitability in the
face of persistent ultralow interest
rates, sluggish growth and fierce
competition from larger U.S. rivals.

A patchwork of European and na-
tional regulations all but block
cross-border mergers, but domestic
tie-ups have been possible. This

summer, Intesa Sanpaolo bought
UBI Banca to create Italy’s largest
bank. Plus, CaixaBank agreed in Sep-
tember to merge with Bankia to cre-
ate Spain’s largest domestic lender.

The logic even for domestic Euro-
pean banking mergers isn’t straight-
forward. Deals offer potential for
cost-cutting and market-share gains,
particularly in overbanked Germany,

Italy and Spain. However, rationaliz-
ing branch networks can be very ex-
pensive and integrating a web of
legacy systems is a challenge, par-
ticularly as customers increasingly
expect to bank online.

Valuation is a barrier to getting
deals over the line. They are gen-
erally all-share exchanges, and the
poor stock-market performance of
banks this year has muddied the
relative weight of different players.
There is also a lot of uncertainty
about what loan books will be
worth in a post-pandemic world.

There had been speculation that
UniCredit might do a deal with
Germany’s Commerzbank, France’s
Société Générale or troubled do-
mestic lender Banca Monte dei Pas-
chi di Siena. However, during his
4½ years in charge, Mr. Mustier fo-
cused on making the bank leaner.

Mergers clear a half-plausible
path to profit growth. That is
enough for some European banks,
but the latest ructions serve as a
warning that the strategy is fraught
with difficulties. Success is far from
guaranteed, even for those deals
that go ahead. —Rochelle Toplensky

Share-price performance

Source: FactSet

–80

–60

–40

–20

0

20%

Jan. 2020

UniCredit

Intesa Sanpaolo

Banco Bilbao Vizcaya Argentaria

CaixaBank Bankia

Banco de Sabadell

More than half of annual gift-card sales for chains occur around the holidays.

JE
FF

R
EY

G
R
EE

N
B
ER

G
/E
D
U
CA

TI
O
N
IM

A
G
ES

/U
IG
/G

ET
TY

IM
A
G
ES

Similer Documents